To be first to the future, be stubbornly nimble

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2:07much of a unique selling point. Welcome to Masters of Scale Strategy Session, where entrepreneurs strategize in real time with iconic business leader Reed Hoffman to solve their most pressing challenges.

2:26I'm your host, Bob Safian, former editor of Fast Company, founder of The Flux Group, and the host of Masters of Scale Rapid Response. For this strategy session, the theme is to be first to the future, be stubbornly nimble. When navigating through new markets or grappling with new technologies, you have to be prepared to pivot and adjust your roadmap at any second. To help us through these waters, I'm delighted to introduce my colleague, co-founder of LinkedIn, partner at Greylock, and the voice of Masters of Scale, Reid Hoffman. Hi, Reid. You ready to play? Always. Let's jump to it.

3:07All right. The first question comes to us from George McArdle, managing partner at VC firm Mount Pleasant and founder of Catrol, an AI platform that scans and monitors U.S. legislation. Hey, Reid. Very excited to be here. Also, may I just add you are an inspiration to the Dungeons and Dragons community for how far one of us can go. I know you've wrangled being both investor and founder. How do you think about risk from both your investor and founder role when approaching emerging tech like AI that is just evolving and changing so fast? Well, it's a great question. And by the way, thank you for the D &D call out.

3:49The way to think about the risk stuff is to say, okay, first, presume that you're not going to be able to make it a purely knowable game. It's useful as an entrepreneur to know that the games are not like chess. They're not fully determined. There's a randomness element. The Ukrainian war, markets, a bunch of other stuff. I have partial risk management, partial control over it, but there's unknown and uncertain things. So then you say, okay, so what are the most key things that I should make bets on? It's almost like risk betting. It brings the investor and the entrepreneur together on it. For example, if it's like AI, what do I think the market demand is going to be like?

4:24What do I think customer reaction is going to be like? What do I think government regulation is going to be like? what things might impact me and what I might need to speak up on. So you want to be thinking about which risks are the absolute ones to really invest in to minimize and keep that as thin as possible, which are smart risks to take that if I take them, I can possibly win large. And how am I monitoring if my theory of the game and the theory of the risks I'm taking is working out so that I might need to pivot or adjust? You have to be responsive to the kind of circumstance you're in. So, George, thank you for your question.

4:58There's a key insight in Reid's answer that I really want to shine a light on here. Entrepreneurship is a game with ever-shifting and uncertain rules. So only take the risks that offer a big enough reward to justify the leap.

5:18All right. The next question comes from Anna Bofa, the founder and CEO of Crate, a software product powered by AI, which allows users to curate content from across the internet. Let's invite Anna in to ask their question. Awesome. So here's my question. There's a lot of conflicting advice in today's climate surrounding Startup Runway. Many people are saying that we should be hoarding capital given the uncertainty of the future right now. However, with all the recent tech layoffs, there's never been more incredible talent available in the market. We're also aware that there's an opportunity to maximize on the current excitement surrounding AI and the public discourse.

6:01So Reed, how do you balance saving capital for the unknown future versus taking advantage of the massive opportunity of available talent and the interest of the space that we're building in. Great question. And thank you for asking in part because this is a question that obviously many, many startups are facing right now. Obviously, we'd all like to have a crystal ball into the future to know exactly when the markets will start changing. So you obviously have to kind of say, well, what's the amount that I need as additional insurance during volatile times? And there are people who will say, no, you should absolutely maintain a minimum of 24 months right now.

6:38When you think, oh, we should hit the accelerator, it's because, well, I'm going to be taking a smart risk. I know that I'll be taking a risk. Maybe Putin will do something additionally sinister and crazy in the Ukraine. Maybe that'll disrupt markets. Maybe the factors outside my control affect what's happening. But it's worth taking this risk. It's worth hiring some of this AI talent. And so selectively taking advantage is a good idea. Now, I think what you want to do is not only playing defense, but playing offense on this. I think that you want to also kind of classically, whether it's a stock market, it goes down and then when it starts coming back, you don't actually want to buy at the absolute bottom.

7:14You want to buy it as it's beginning to grow back up. So what you kind of want to do is say, well, OK, we think we're going to be able to get to our new milestones, some interesting marketing, some interesting product stuff. If we accelerate now here and hire some of the talent, in the similar way of financial investors buying into that market, you want to be thinking the same way about the marketing, about the talent acquisition, about the product development, about the acceleration. because the thing that's so frustrating as an entrepreneur is we don't quite know when do these turbulent times stabilize and start heading to the normal economic growth pattern, in part for where there's a lot of factors that are totally out of our control.

7:52So, Anna, look forward to hearing the progress and the AI acceleration. Thank you for your question. Here's a nugget of wisdom I'm going to be thinking about from Reed's answer. Now is a smart time to play defense and offense Be sensible with your financial runway But don't let it totally prevent you from capitalizing On rare and precious opportunities available right now After the break, we'll hear two more entrepreneurs Pose their questions to read One about the common challenge of storytelling with new tech And the other about the difficulty of setting a price for your product You won't want to miss it.

8:33Stick around.

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10:39IBM helps you turn AI into more than potential. It helps you turn it into smarter ways of working and ultimately scaling. Let's create smarter business, IBM. We're back with Masters of Scale Strategy Session, where emerging entrepreneurs strategize in real time with iconic business leader Reid Hoffman to solve their most pressing challenges. The theme for today, to be first to the future, be stubbornly nimble. Let's dive back in. All right, we go to Lauren Fitzpatrick-Shanks, founder and CEO of Keepwall. Keep Well is an interactive platform that uses team games to enhance employee engagement, skill development, and talent retention.

11:24Hey, Reid. I'm excited to have the opportunity to ask you a question and super excited to hear that you love games. So my question is, with new and emerging tech at the forefront of Keep Well, we've struggled to find a consistent story that can resonate with customers, talent, and investors alike. How do we hone the story of KeepWall that does justice to the new tech while also making it simple enough and relatable enough to a broader range of relationships? As the first to offer this new learning technology in our sector, we know that other businesses will eventually attempt to utilize the new tech similarly.

12:02So, Reid, how does the story we're telling shift once the technology isn't as much of a unique selling point? so i think there's a lot of interesting components to your question obviously it's great if one story meets all constituencies and so you try to do that but sometimes you need story architecture so you go look this is our primary we primarily need it for our customers that's the one out there and then we have an add-on almost like a lego piece that you add on to it for talent or for investors and then say well it's two pieces it's not that simple but it's like you try to make the two pieces simple.

12:35So it's what is the kind of the simplest architecture to that. Now, to the kind of broader question, as you advance, and I do think that games is a really good way to build relationships and interact. So I think you say, okay, well, to some degree, the technology is never really the selling point. It's the human engagement. It's the, how is my world and life different or better by using this product and service? And sure, the technology may literally say, I'm the only one who can do it because I only have this thing doing that. But eventually, it's through that ongoing engagement. And that's something for all entrepreneurs to keep in mind, which is it's the value that's the key thing that technology is only the supporting character.

13:12This is something a lot of leaders need to hear in 2023. So I'm going to echo Reed for another spotlight. Your new technology, however unique, is often just the supporting character. Your true selling point is the way in which the product can make the customer's life better.

13:34Alberto Rodriguez Navarro is the founder and CEO of Levita, which is a medical equipment manufacturer pioneering magnetic technology and robotics for minimally invasive surgery. Let's bring Alberto in for their question. Alberto. We at Levita have developed a first-of-its-kind robot in the medical technology field. Other surgical products aren't particularly comparable. So, as you can imagine, Reed, there are many strategic questions that we're facing, like, how do you manage the messaging when people think that we are trying to replace humans with robots? And how do you set that initial price for a brand new product when there's so little to compare it?

14:15Well, it's a classic disruptive innovation that causes people to have these kind of like, are you replacing people? As a general theme when you're an entrepreneur is how do you convert challenges into opportunities? As opposed to saying, you know, allowing the criticism to brand frame you as, you know, oh, you're replacing humans with machines. It's like, no, no, we're making humans a lot better. It's human plus machine. And the human plus machine will have much better outcomes, will be able to iterate and learn better, will set new benchmarks. And part of when you're thinking about the initial price, it depends a little bit on what do you think the growth rate's going to be.

14:55Sometimes people set very disruptive pricing, like 20 % or one third. I would think in your kind of arena, it would be better, closer to 80%, but could be 50, where you say, well, what's the cost that we're saving? What's the benefit that we're adding and pricing below that? And I think when you look at all of this, it's kind of a question of how do you set the frame for the story about how people will think about what your product is, what using it as a surgeon would be, what receiving it as a patient would be, and the amplification of human beings in each of these cases. And I do think that one part of it is how do you communicate those mindsets?

15:37And I think one of the things that's part of the last couple of decades of the internet is trying to get influencers or other people kind of articulating the story, the framework, the point of view is part of what gets that well. I think it's great that you're doing this invention. I look forward to hearing the path of success. And thank you for the question, Alberto. Reid, I loved listening to your answers. And particularly, I was curious what you were going to say about pricing, because pricing is something that constantly challenges me, you know, and I think sometimes that question between sort of, are you a premium product with a premium price?

16:12Or are you trying to get in with a sort of a fighter brand price? And they're very tricky, very tricky questions to deal with. Part of what you do there is you look at, if you're premium, you say, look, it's going to be so much better. So it'll be priced more than it was before. So it's still kind of a discount of progress towards that. But that may be the reason why the price seems to be going up because you're adding so much more in. Let's take a moment to shine a light on one last key insight. Don't allow others to frame your brand before you have. Once you've honed the story of your product or your business, then find influential voices to take the baton and run with it.

16:53All right, Reid. So one of the themes we've seen in our questions and something I hear CEOs grappling with all the time is trying to figure out what new developments we need to react to now and what we can be patient about. Jeff Bezos has famously used this phrase day one at Amazon, to encourage the team to act unencumbered by the past, embrace a beginner's mindset, know nostalgia, to sort of fight the resistance, right? But if we start over every day, like it's day one, we never build any momentum. We can be jumping from one thing to the next. So how do you know if a new development is central and requires attention, or if it's just a distraction?

17:38I usually think about it as kind of, what is the theory of the game and has the game changed? So for example, Microsoft, when Bill Gates was CEO, was building an online service called Blackbird because they thought they needed to compete with CompuServe and AOL and so forth. Then they saw the internet coming and literally Bill had all of the engineers' hard disks erased to start working on the new internet services. So it was like, no, no, you have to do this. And that's like the hard shift to a new day one. But that's because the theory of the game changed. It was like, oh, we're not doing these online dial-up services anymore.

18:10Those will only live a certain amount of time. It's all going to be internet. We need to be going to where the future is going, not to the past. And then obviously there's degrees of that. So when you have a shift to mobile, some things go, oh, my God, everything's going to have to end up being mobile first. I need to go mobile right away. And by the way, ultimately that'll percolate to enterprise and everything else. But like enterprise software companies didn't have to immediately go, oh, my God, we have to be everything on mobile. because their customers said, oh, we care about it. Our employees are bringing stuff in.

18:39They want to be able to use this from wherever they are, but it will be a gradual adoption. So it isn't a day zero thing. It's kind of a more iterative pattern. And one of the things that I frequently do is I break the kind of three buckets. It's V0 to V1, V1 to V11, V1 to V2, because even that kind of revolution of V1 to V2 is not day one, but it's a major jump. And the way that you play each of these three games is actually, in fact, different. What's your theory of the game? And what does this change, market change, technology change, et cetera, what does this mean to me, to our business? And how much of a sharp adjustment to our play of the game do we need to make?

19:19And so if you've concluded that like, this is really changing the game, you want to make a hard shift. Yes. But if you're not sure, you want to test sort of. You want to like see how much it really does change the game and how much it doesn't, so you know whether to make a hardship. Yep. And sometimes testing is saying, let's go talk to 10 people who are smart. It's like one of the ways I learned Michael Dell is he saw these LinkedIn invitations coming in. He said, this is interesting. I wonder how this changes things. And he reached out and talked to me. Sometimes it's like to figure it out is to just go ask.

19:53Ask the questions. Yeah, great. You're a proponent of games as a way to build strategic thinking. Why is that? what role do games play for you? Have they played for you? Well, so people kind of assume that it was going and kind of put on an MBA and stuff with learning strategies. No, the strategy stuff was all from games because what you want to have in a game is you want to have a theory of how this game plays. You want to have a theory about, OK, what is the way that I'm going to win the game? What are the challenges that I need to overcome in order to do it? And so to some degree, it has been advanced that we are homo ludens, which is game players.

20:30and that Wittgenstein, like language, is actually a form of game playing. And you want to take that game and say, okay, am I playing the right game? Do I have the right theory of the outcome? And what are the games other people are playing? And will this game work? And then you have to adjust the game. And classically, like with disruptive innovation, part of what happens is entrepreneurs figure out a way, a theory, how to change the game because of a new technology or a new market, a change in how things are operating or a change in the way things could operate. And I think that's the kind of central thing for thinking about games as how we think and strategize and evolve our products and companies.

21:09Well, I love that, Reid. I can't wait to keep playing some games with you. Always.

21:18All of our strategy sessions are recorded live in front of a virtual audience. These unique events are created in alliance with our premier brand partner, Capital One Business. Please join us for the next live strategy session. All you have to do to register is visit mastersofscale.com slash strategy session. And if you've got a question that you'd like to ask Reed in a future session, just email askreed at mastersofscale.com. I'm Bob Safian. Thanks for listening.

21:55Meet Emily Warden, Capital One Business customer and owner of Emily Warden Designs, a handcrafted fine jewelry store in Richmond, Virginia that got its start in a dorm room. I said I was going to try it for a year. I signed up to do craft shows, trade shows, got into a few local boutiques, and then things just picked up from there. Emily's steady success at trade shows gave her the capital she needed to invest in a storefront. Every cent that was made was going back into the business. I was nervous that we weren't going to get enough traffic, but we had a huge turnout. With Emily Warden Designs firmly establishing itself in the Richmond community, Emily would need to significantly increase inventory in order to keep up with demand.

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